Roanoke Cement Co v. Falk Corporation

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ROANOKE CEMENT COMPANY, L.L.C., 
Plaintiff-Appellant,
v.
 No. 04-2047
FALK CORPORATION; HAMILTON
SUNDSTRAND CORPORATION,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
Glen E. Conrad, District Judge.
(CA-03-753-7)
Argued: May 25, 2005
Decided: July 1, 2005
Before WIDENER, WILKINSON, and NIEMEYER, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the opinion,
in which Judge Widener and Judge Niemeyer joined.
COUNSEL
ARGUED: James William Logan, Jr., LOGAN, JOLLY & SMITH,
L.L.P., Anderson, South Carolina, for Appellant. Michael James Gar-
nier, GARNIER & GARNIER, P.C., Falls Church, Virginia, for
Appellees. ON BRIEF: James W. Barkley, Elisabeth M. Ayyildiz,
MORIN & BARKLEY, Charlottesville, Virginia, for Appellant. Jean-
Pierre Garnier, GARNIER & GARNIER, P.C., Falls Church, Vir-
ginia, for Appellees.
2 ROANOKE CEMENT v. FALK CORP.
OPINION
WILKINSON, Circuit Judge:
In this diversity action we must decide whether appellant is entitled
to indemnification for losses associated with the failure of a machine
part that appellee helped manufacture. We hold that the contract con-
tained no clause requiring such indemnification. We therefore affirm
the judgment of the district court.
I.
Appellant Roanoke Cement Company, L.L.C., a Virginia corpora-
tion that manufactures masonry cement, contracted with Fuller Com-
pany to design and build a "ball mill" for Roanoke’s plant. Fuller
subcontracted for the "pinion shaft," a component of the ball mill,
with appellee Falk Corporation of Delaware. To this end, Fuller sent
Falk a purchase order on June 8, 1999. This document described the
required technical specifications of the pinion shaft and set out the
delivery date and price. The order also stated that "[a]cceptance . . .
including [of] all terms and conditions on the face and reverse [ ] shall
be deemed given upon . . . commencement of work on this order."
Under one of these "terms and conditions," the seller was to "indem-
nify, defend, and save [Fuller and Roanoke] harmless from any and
all claims, liabilities, damages, losses, settlements and expenses [for]
loss of or damage to property in connection with the materials fur-
nished hereunder."
After receiving the order, Falk began its internal review process to
determine whether it could manufacture a conforming pinion. To
facilitate this determination, appellee sent a purchase order for "pin-
ion forging" to another merchant. Satisfied that it could build the pin-
ion as specified, Falk sent an "acknowledgment" back to Fuller on
July 30. This document made itself "contingent upon acceptance of
Falk’s standard terms and conditions listed on the reverse side." These
terms and conditions made clear that "[i]n no case shall [Falk] be lia-
ble for any special, incidental, or consequential damages based upon
breach of warranty, breach of contract . . . or any other legal theory,"
"regardless of anything which may appear on [the] purchase order."
ROANOKE CEMENT v. FALK CORP. 3
Fuller received the acknowledgment form without protest. The ball
mill, including the completed pinion, was installed in Roanoke’s
facility in May 2000. In 2001, the pinion failed and appellant experi-
enced a business interruption. The company instituted the present
action to recover for losses associated with that interruption. After a
bench trial, the district court found for Falk. Roanoke appealed its
claim for indemnification under the terms of the purchase order.
II.
We review a judgment following a bench trial under a mixed stan-
dard of review — factual findings may be reversed only if clearly
erroneous, while conclusions of law, including contract construction,
are examined de novo. Williams v. Sandman, 187 F.3d 379, 381 (4th
Cir. 1999); Scarborough v. Ridgeway, 726 F.2d 132, 135 (4th Cir.
1984). We apply the choice of law provisions of our forum state. The
applicable Virginia choice of law rule states that "[f]ailing [an] agree-
ment" on which state law to apply, "this act applies to transactions
bearing an appropriate relation to this Commonwealth." Va. Code
Ann. § 8.1-105(1) (Michie 2001).1 We therefore find that Virginia law
governs. See Besser Co. v. Hansen, 415 S.E.2d 138, 143 (Va. 1992).
III.
The parties agree that a contract existed between them, as the UCC
requires them to do. See §§ 8.2-204, 8.2-207(3). Roanoke and Falk
differ, however, as to the terms of their agreement. On appellee’s urg-
ing, the district court found that the acknowledgment "became the
contract between" Fuller and Falk. Appellant alleges, to the contrary,
that the method of acceptance specified in the purchase order —
"commencement of work" — was satisfied by Falk before it returned
the acknowledgment. Thus the exclusive contractual terms are those
specified in the purchase order, including the indemnification clause.
Appellant’s argument that the terms of the purchase order are con-
trolling is unpersuasive. It is true that a purchase order is generally
1
Part of the Virginia UCC was repealed and recodified. See Va. Code
Ann. §§ 8.1A-101 to 310 (Michie Supp. 2004). All citations herein are
to the 2001 version, which governed the interactions of the parties.
4 ROANOKE CEMENT v. FALK CORP.
"an offer which may then be accepted or rejected by a seller." J.B.
Moore Elec. Contractor, Inc. v. Westinghouse Elec. Supply Co., 273
S.E.2d 553, 556 (Va. 1981). And the UCC recognizes that acceptance
may be given "in any manner and by any medium reasonable in the
circumstances." § 8.2-206. However, provisions in the offer making
"commencement of work" or the like a method of acceptance should
not be interpreted too broadly.
Sellers of industrial goods will often have to confirm their ability
to supply a product to a buyer’s specifications. Such investigation is
particularly needed when, as here, the product is not generic and is
intended for a specialized purpose. The only effective time for this
investigation to take place occurs prior to the seller agreeing to fill the
order. A prudent business practice would thus be undermined if pre-
liminary investigation somehow obligated the seller to provide the
requested product even where its review ultimately revealed it to be
incapable of doing so. A rule that bound the seller to all the terms of
the offer as soon as investigatory steps began would induce many
merchants to avoid such steps altogether. As a result, a good number
of fruitful business relationships, advantageous for buyer and seller
alike, would be foregone.
This state of affairs would hardly honor the "continued expansion
of commercial practices" or provide the "flexibility" in commerce that
the UCC aims to promote. § 8.1-102 and Comment 1; see also Audio
Visual Assocs., Inc. v. Sharp Elecs. Corp., 210 F.3d 254, 258 (4th Cir.
2000). We therefore conclude that the phrase "commencement of
work" in the purchase order contemplated a more substantial under-
taking by Falk than the tentative steps it took to confirm its ability to
perform.2
An examination of the prior "course of dealing" between the parties
2
Appellant also claims that, because appellee failed to contact appel-
lant within ten days of receiving the purchase order, another provision
equating such failure with acceptance was triggered. Roanoke neglects to
mention, however, that this method of acceptance only applied when the
purchase order was "confirming a previous oral agreement." Appellant
has not presented evidence sufficient to demonstrate that such a binding
agreement existed.
ROANOKE CEMENT v. FALK CORP. 5
strengthens this conclusion. See §§ 8.1-205, 8.2-202(a). Witnesses for
both parties testified that Fuller and Falk customarily did business by
exchanging purchase orders and acknowledgments. Appellee also pre-
sented evidence that it routinely delayed sending an acknowledgment
while it confirmed its ability to fill particular orders. Work performed
during this period was not charged to Fuller, and Fuller remained free
to cancel the order at any time prior to appellee’s acknowledgment.
The working relationship between Falk and Fuller thus suggests
that neither considered itself contractually bound in the period before
an acknowledgment was sent. This observation undermines Roa-
noke’s attempt to stand on the indemnity provision of the purchase
order here. Indeed, appellant does not dispute Falk’s account of the
parties’ prior course of dealings. Rather, Roanoke questions the "re-
levan[ce]" of this evidence and finds reliance on it "misplaced." How-
ever, the UCC endorses a wide-ranging recourse to course of dealings
to reveal "a common basis of understanding" between the parties. See
§ 8.1-205(1), (3). Consideration of such evidence is thus plainly
appropriate to interpret as indeterminate a provision as "commence-
ment of work."
For the foregoing reasons, it is evident that appellee never mani-
fested an intention to be bound by the provisions set forth in the pur-
chase order. Instead, Falk completed its review of that order and
returned the standard acknowledgment form to Fuller.3 The rejection
in this acknowledgment of the indemnification provision of the pur-
chase order could not be clearer. In contrast to the broad "save [ ]
harmless" language in the purchase order, Falk proposed a limited
warranty which "[i]n no case" should extend to "special, incidental,
or consequential damages [under any] legal theory."
The legal consequences of mutually exclusive provisions, such as
those contained in the purchase order and acknowledgment, are well-
settled. Where a contractual relationship is established, but not by a
3
Roanoke denies that the acknowledgment was received by Fuller.
However, the district court explicitly found that Falk did send this docu-
ment and that "Fuller did not object to [its] terms." Because this finding
is not clearly erroneous, it must stand on appeal. See Williams v. Sand-
man, 187 F.3d 379, 381 (4th Cir. 1999).
6 ROANOKE CEMENT v. FALK CORP.
particular writing, "the terms of the [ ] contract consist of those terms
on which the writings of the parties agree . . . ." § 8.2-207(3) and
Comment 7; see Wells, Waters & Gases, Inc. v. Air Prods. & Chems.,
Inc., 19 F.3d 157, 160-61 (4th Cir. 1994). We therefore need not even
find, as the district court did, that the acknowledgment is the govern-
ing contractual document to defeat Roanoke’s claim. For application
of § 8.2-207(3), in light of the parties’ admission that a contract
existed, means that the indemnification provision of the purchase
order effectively falls away. See Brewster of Lynchburg, Inc. v. Dial
Co., 33 F.3d 355, 362-63 (4th Cir. 1994). Appellant’s reliance on that
provision is therefore unwarranted.
IV.
We hold that the contract entered into between Falk and Fuller did
not include the indemnification clause contained in the purchase
order. We thus conclude that Roanoke is not entitled to recover from
Falk on the basis of this clause. The judgment of the district court is
accordingly
AFFIRMED.